**Seattle**: Costco Wholesale Corp. faces mixed financial results due to tariffs impacting operations. Despite challenges, the company remains optimistic, emphasising its global buying power and flexible merchandising strategy to mitigate price increases and maintain competitive pricing amid escalating economic pressures.
Costco Wholesale Corp. has reported a mixed bag for its second-quarter financial results, with the company’s leadership acknowledging the significant impact of tariffs on its operations. Despite the challenges, the retailer is optimistic about leveraging its global buying capabilities and supplier relationships to mitigate potential price increases.
During the earnings call, Ron Vachris, Costco’s president and CEO, remarked, “When it rains, it rains on everyone,” highlighting the widespread nature of the current economic challenges. Approximately one-third of Costco’s sales in the United States derive from imported goods, with less than half of those imports sourced from China, Mexico, and Canada, indicating that a substantial proportion of its merchandise may be affected by recent tariff policies.
To counteract these impacts, Vachris emphasised Costco’s strategy of using its “global buying power, strong supplier relationships and innovation.” Gary Millerchip, the executive vice president and CFO, reiterated the company’s commitment to maintaining competitive pricing, stating, “Our goal is always to be the first to lower prices where we see opportunities to do so and the last to increase prices in the face of rising costs.” This approach may necessitate absorbing some of the cost increases to uphold the retailer’s value proposition.
The management team also highlighted the flexibility of Costco’s merchandising strategy, particularly its “Treasure Hunt” approach, which allows for the quick substitution or replacement of items to minimise the impact of any specific goods affected by tariffs. However, they cautioned that for certain categories, especially fresh foods with tighter margins, passing along some costs may remain unavoidable.
Vachris further noted that the tariff landscape is “very fluid,” but he expressed confidence in the company’s preparedness, stating, “But we are prepared.” He also mentioned that Costco is “well equipped to lower prices and defer any cost increases.”
The context for these remarks comes amid escalating tariff tensions, as earlier this week, President Donald Trump imposed a 25% tariff on goods from Canada and Mexico and increased levies on Chinese imports to 20%. Although he has since backtracked on certain items, the threat of new “reciprocal tariffs” on all trading partners looms, set to take effect on April 2.
Costco’s financial figures for the second quarter, which reached $62.72 billion, surpassed revenue estimates, although adjusted earnings per share fell short at $4.02. The company also reported an increase in membership fees, rising to $1.19 billion, following a price hike implemented in September 2024.
In terms of market performance, Costco’s shares declined by 2.2% on Thursday and continued to fall by 1.20% in after-hours trading. Notably, the Invesco QQQ Trust, which tracks the Nasdaq 100 index, fell by 2.75% on the same day. Nevertheless, Costco’s stock has shown resilience with a year-to-date increase of 12.84% and an impressive 30.68% gain over the past year.
Analysts currently tracking Costco’s stock provide an average price target of $1,018.15, reflecting a “hold” rating, with estimates ranging from $890 to $1,175. Recent evaluations from firms such as Telsey Advisory Group, DA Davidson, and Stifel average at $1,058.33, indicating a potential upside of 4.34%.
Source: Noah Wire Services
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